If you’re a property owner, contractor, or subcontractor in the construction sector, on July 1st, 2018 the rules in which you operate in Ontario will change.
In 2015 a review was launched into Ontario’s construction laws; laws that had not seen significant revision in nearly three decades. In 2016 that review became the report titled ‘Striking the Balance: Expert Review of Ontario’s Construction Lien Act’. This report included nearly 100 recommendations aimed at modernizing the legal landscape of Ontario’s construction industry as well as strengthening and improving its efficiency and competitiveness.
The implications of the Construction Lien Amendment Act, which passed by unanimous vote in December 2017 and renames the Construction Lien Act to the Construction Act (the Act), are significant. With an eye towards modernizing specifically construction lien and holdback rules, ensuring prompt payment, and streamlining dispute resolution, some notable changes include:
- Project owners and other payers will be required to pay contractors and subcontractors holdbacks once the timeline to file liens (now 60 days to register and 90 days to file a court action) has passed;
- Condominium unit owners will be allowed to remove liens from their unit that are related to improvements made to common elements such as corridors, lobbies, the garage, and the roof;
- Contractors and subcontractors will have to follow specific bookkeeping rules to protect subcontractors in the event of bankruptcy;
- Public sector owners such as the Crown, municipalities, and broader public-sector organizations will be required to have a surety bond on public contracts above a prescribed amount and alternative financing and procurement arrangements (AFPs) will be subject to a minimum coverage limit in order to protect subcontractors and workers if the general contractor files for bankruptcy;
- Parties to a legal action may request that a judge refer construction lien claims under $25,000 to Small Claims Court; and
- Language throughout legislation will be clarified to better reflect large-scale, public projects that have multiple owners.
These and other changes will be implemented in two parts, with the updated construction lien and holdback rules coming into effect on July 1st, 2018 and new prompt payment and dispute resolution processes along with amendments to liens against municipalities coming into effect on October 1st, 2019.
What does this mean for your project in process? There is a provision for grandfathering of existing contracts in Section 87.3 of the Construction Lien Amendment Act. If your contract, procurement process, or lease (where applicable) was entered into or commenced before the relevant sections of the Act come into effect (July 1st, 2018 or October 1st, 2019, respectively), it will be subject to the current Construction Lien Act.
What does this mean for your future projects? Over the next few weeks we will be diving into what has changed in the new Construction Act and how it will affect your business. If you have immediate questions, email us at email@example.com and we would be happy to chat about what the new Construction Act means for you.
The information in this article is of a general nature and is in summary form. Contact one of our professionals to discuss these matters in the context of your situation before acting upon such information.